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ECOSOC Special Meeting on Inequality

30 March 2016

INFORMAL SUMMARY OF THE PRESIDENT

I. Introduction

The ECOSOC Special Meeting on Inequality, convened by the President of ECOSOC, was held on March

30 at the ECOSOC Chamber in New York. The meeting provided a platform for dialogue and exchange

of lessons learned, engaging high-level experts from all stakeholders, including Member States,

academia, civil society and the UN system. The ECOSOC Special meeting addressed inequality as a

crosscutting issue for the 2030 Agenda and sought to create momentum for the achievement of its

standalone goal on inequality, SDG10. The objective of the meeting was to (1) analyse key drivers of

inequality at the national, regional and global level; (2) provide policy recommendations that can

effectively address the systemic causes of inequality within countries as well as among countries; and

(3) find ways to strengthen institutions at all levels to support the reduction of inequality and the

review of progress.

II. Key Messages

� Inequality is a universal challenge faced by all countries and encompasses gaps not only in income

and wealth, but also in access to and outcomes in health, education and other essential human

needs. Policies to tackle inequalities need to address the cross-cutting nature of inequality in the

economic, social and environmental dimensions.

� Addressing inequality is a moral imperative. To leave no one behind, those furthest behind must be

the main focus of policy action. To achieve this objective, inclusive institutions have to be built at all

levels in order to give a voice to those in greatest need and ensure that commitments made are

kept.

� Successfully reducing inequalities requires enlightened leadership. The political will to align policies

and institutions with the ambition of the 2030 Agenda for Sustainable Development is imperative.

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� The 2008/09 financial crisis highlighted the far-reaching, devastating impact of poorly regulated

global financial markets. While economic growth and integration is essential for human

development, mechanisms are needed to moderate negative market impacts and encourage

broad-based growth, appropriate redistributive policies and sustainable development.

� Focusing efforts on gender equality is at the heart of reducing economic, social and political

inequalities.

� Special attention must be paid to the poorest and most vulnerable in political and social processes.

� In measuring the overall well-being of society, a major shift is needed in how ‘progress’ and

‘development’ are measured. In this vein, the international community should continue to work on

developing alternative indicators to GDP for measuring progress on sustainable development.

� The “rules of the game” need to be adjusted to ensure that policies do not disproportionately

benefit those who are already best-off within societies and the international system.

� Specific efforts need to be made to enhance the participation and inclusion of vulnerable or

historically disenfranchised groups, such as indigenous peoples, rural dwellers and others and

ensure their unequivocal rights to public services and societal engagement.

� Shared objectives for reducing inequality are critical to success. The Sustainable Development

Goals provide a blueprint for action on tackling inequalities, particularly through SDG10. Strong

partnerships must now be fostered for achieving inequality-related goals and targets and to

support the new agenda.

� A special commission within the UN system should be created, dedicated to follow up, monitor,

and systematize approaches to inequality. New rules and mechanisms are needed to create

partnerships and constituencies for tackling inequalities. It is a challenge that will involve

leadership and engagement on the part of all stakeholders.

� Distorted and sub-optimal economic systems often coincide with high rates of inequality. Key

catalysts for inequalities in these systems include weak governance structures and cronyism,

limiting citizens’ access to basic services and jeopardising fundamental human rights. Corruption,

rent-seeking behaviour by elites as well as tax evasion further entrench these structural and

institutionalised inequalities.

� Greater awareness is needed of the negative impact of inequality on economic growth and

development among decision-makers to address systemic obstacles. Policies should be tailored to

tackle corruption and rent-seeking, while enhancing redistribution to achieve more equitable and

sustained growth. This will require strong political will given that disrupting the status quo is

challenging.

� The international community should scale up its efforts in implementing Goal 10 of the 2030

Agenda for Sustainable Development to reduce inequality among countries, ensure greater

representation and voice for developing countries in international economic and financial

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institutions, facilitate orderly, safe and regular migration flows, reduce the transaction costs of

migrant remittances, provide ODA to developing countries and promote fair and free trade.

� There is the need for a statistical revolution for the SDGs. Data needs to be disaggregated to reflect

the dynamics of inequalities, ensuring that horizontal inequalities between groups, based on race,

ethnicity, gender, disability, economic status and others can be effectively tackled through

dedicated and targeted policies.

III. Opening Session

Inequality is a universal and multi-dimensional challenge. In recent decades, gaps in income and

wealth, as well as in access to basic human services, have been growing steadily through much of the

world. If such trends continue, societies will face weakened social cohesion, with the risk of economic,

political and social instability providing the fertile grounds for violence and extremism.

Yet, there is nothing inevitable about growing inequality. Where political will exists, much can be done

to address it. Many countries have increased efforts to reduce inequalities by committing to the

provision of universal access to public goods and services and redistributive tax policies. History

underlines that there is no explicit trade-off between economic development and greater equality. The

Republic of Korea, for instance, managed to achieve rapid economic growth and a reduction in

inequalities by prioritising education and technical training to ensure opportunities for all.

Gender equality is at the heart of reducing inequality within and between countries. The needs of

women and girls along with other vulnerable groups in society, need to be more visible, with better

access to basic public services, and be included in political decision-making processes. This requires a

range of policy measures that should be taken by all countries. Countries like Uganda are making

concerted efforts in this regard, including through measures to increase the number of women in

political office and ensure that the needs of girls and women are mainstreamed into policy making

processes.

At the national level, the SDGs must be placed at the center of national planning, as well as budgeting,

from central to local governments, as well as national parliaments. In order to ensure that the

implementation of SDG10 and other SDGs is prioritised by policy making bodies, it is essential that

governments establish national frameworks that facilitate data collection, evaluation and follow-up on

the SDGs. These institutional arrangements could be based on parliamentary review, which would

heighten its accountability and ensure that the voices of all constituents are heard. National ownership

of policies to address inequality is also crucial. Each country needs to implement policies that properly

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reflect the multidimensional nature of inequality and adequately integrate the three dimensions of

sustainable development.

Inequality between countries remains a challenge. The recent financial and economic crisis has shown

that poorly regulated global financial markets can be key drivers of inequality and wreak havoc on

economies and, most importantly, people’s lives. The crisis demonstrated that the most vulnerable

groups and countries are disproportionately affected by global shocks and crises. International

institutions have a crucial role to play in promoting global financial and economic governance that

supports the achievement of the 2030 Agenda.

IV. Tackling Inequality – A moral imperative and goal of the 2030 Agenda

In order to reduce inequality, the structural barriers to achieving equality need to be addressed. The

barriers can be overcome through strengthened and reconfigured rules and regulations at national and

global levels. Changing the “rules of the game” will require changing mindsets and overcoming

powerful systemic inertia. In the absence of an inclusive and equity-oriented system of rules, there is a

danger of a ‘race to the bottom’ in labour standards, human rights and the provision of public services

in an attempt to achieve short-term economic windfalls. At the national level, rent seeking and

monopolies will not be catalysts for growth - it is equal and fair opportunities for all that will help

achieve equitable and sustainable development for all.

While some see the struggle for equality as a potential encroachment on individual freedom, equality

and liberty are in fact mutually reinforcing. Only by tackling inequality and increasing the freedoms of

the poorest, can the most marginalised groups be empowered. Societies that are unequal deprive

those that are left behind of the freedom to live a life in dignity and condemn future generations to

poverty and marginalisation.

To reduce inequalities at all levels, there is the need to shift away from extractive development models

that benefits the few and entrenches inequalities within and between countries. These models carry

direct costs for the most vulnerable groups within society and undermine the collective efforts to

achieve sustainable development for all. Extractive models should make place for sustainable models of

development that champion inclusion and participation of all stakeholders in decision-making

processes. Despite the significant progress that has been made in fostering inclusion, many groups

including indigenous peoples, women, persons with disabilities and youth continue to be marginalised

and largely excluded from major decision-making processes. In order to ensure that these groups are

empowered, inclusive institutions need to be built at all levels.

Another major obstacle to achieving more equal societies is the way ‘development’ and ‘progress’ are

measured. An overemphasis on GDP and economic output does not adequately reflect progress on

sustainable development as it excludes other, more relevant indicators, including but not limited to the

status of vulnerable groups, inclusion and political participation as well as outcomes on social

indicators.

Not only at the national level, but also at the global level must inclusion be strengthened to reduce

inequalities. Crucial policies such as on trade, illicit financial flows and international tax cooperation,

are often made at a complex juncture of the national, regional and global levels and thus outside of the

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reach of citizens and stakeholders more generally. It is of utmost importance that mechanisms are put

in place at the global level that can foster civil engagement, information sharing and accountability.

In tackling the wide range of challenges associated with inequality, the 2030 Agenda for Sustainable

Development, in particular Goals 5 and 10, provide a moral compass and comprehensive framework for

change. In implementing this framework, policies need to be implemented that are actionable and

innovative, fulfilling the Agenda’s promise of ‘leaving no one behind’.

V. Addressing Inequality: Policy priorities at the national and regional level

Policy approaches at the national level were often built on an implicit assumption of the existence of a

trade-off between achieving rapid economic growth and greater equality. However, recent quantitative

analysis of cross-country data suggests that rather than a trade-off, a win-win situation exists between

growth and equality.

There is a strong negative relationship between the level of net inequality and growth in income per

capita. In other words, an increase in inequality, as measured by the Gini coefficient decreases growth,

if the level of redistribution and initial income is held constant. With regards to the durability of growth

spells, lower net inequality drives faster and more durable growth.

Redistribution appears generally benign in its impact on growth. On average, across countries and over

time, governments' efforts to redistribute did not lead to bad growth outcomes, unless they were

extreme. Redistribution has an overall pro-growth effect, counting both potential negative direct

effects and potential positive effects of the resulting lower inequality.

New and innovative thinking on macro-economic policy is urgently needed in order to address current

and emerging trends in inequality. Much of the recent economic analysis and proposed policy

solutions focusing on inequality have dealt with micro-level policy. While this has led to important

Figures 1, 2: Negative relation between inequality and growth/duration of growth

Source: Presentation delivered by Jonathan Ostry, Research Department, IMF

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advancements in how we think about inequality, especially at the national level, greater efforts are

needed to rethink broader fundamental changes to economic systems that can support sustainable

development. In this vein, a reorientation towards the “bigger picture” of equitable economic systems

and practices is recommended. In order to lastingly overcome structural drivers of inequality, there

needs to be a fundamental change in economic thinking, moving towards integrated and holistic

approaches to prioritise sustainable growth over short-termism and inequitable economic gains.

Addressing market failures and inefficiencies will require concerted efforts to implement redistributive

policies to improve the provision of public goods. Governments should commit to ensuring access to a

wide range of social services, such as health, education, housing, retirement income and child care. This

improves over well-being, could impact positively on productivity and promote social mobility. Such

provision can be achieved through a variety of measures, including direct cash transfers, fair taxation

systems, universal basic incomes and social pensions. Effective policy tools for reducing inequalities

include the promotion of product-market competition, the universal provision of a wide range of public

goods and services, and direct income transfers.

Combatting corruption is another important policy priority at the national level, as corruption distorts

economic systems and undermines effectiveness in service provision, eroding social cohesion and

increasing polarization.

VI. Addressing Inequality: Policy priorities at the global level

Poverty and Inequality are strongly related. Nonetheless, there is no unequivocal consensus for

combatting inequality as compared to the broad consensus on the need to eradicate poverty. This can

represent a hurdle in achieving, SDG1 and SDG10. In many contexts poverty is driven by excessive

inequalities. Special stand-alone policy action on inequality is needed therefore to combat it at all

levels.

The international economic and financial architecture reinforces inequalities within and among states,

as financial crises, economic imbalances, inequitable trade patterns and illicit financial flows, hurt the

most vulnerable the most. Currently, per capita GDP of developed countries is eight times higher than

for developing countries with gaps widening in education, health and science and technology.

Disparities in influence and decision-making power in international political and economic fields are

even greater.

As suggested by the Gini coefficient, the most unequal parts of the world are the Americas. The

historical context particularly in Latin America, marked by conquest, domination of indigenous societies

and stratified discrimination often shape the degree of inequality. However, amid a global trend of

rising inequalities, Latin America has managed to reduce inequality by tackling some of its historically

entrenched drivers, including those based on slavery and colonialism, remoteness, discrimination as

well as corruption, elitism and plutocracy.

Good governance and fair fiscal policies are fundamental for any country to achieve SDG 10. According

to the Gini coefficient, the Scandinavian countries are amongst the most equal and in the world. One

of the key drivers of this trend has been the continuous commitment to building capacity in governance

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and strongly redistributive fiscal policies. High quality and affordable education, accessible for all have

further supported more equitable societies.

At the global level, financial and economic volatility contributes significantly to inequality. A major

driver of volatility and imbalances in the global financial system is the absence of a strong framework of

rules and regulations. This vacuum creates an environment that is skewed towards the richest and

leaves the most vulnerable countries and peoples behind. A similar absence of a level playing field can

be observed in the international trading system that fails to cater to the needs of the most vulnerable

countries.

Tax evasion, a lack of transparency and illicit financial flows continue to be major challenges at the

global level. Taxation is a key policy tool in addressing inequality and poverty, as the relationship

between taxation and poverty is strongly negative (see Figure 4). Tax evasion thus directly impacts the

ability of a government to tackle inequality through policies. Startling numbers underline the extent of

the problem of tax evasion: In many countries, illicit financial flows are larger than investments in

health and education. Corruption, bribery and theft have caused a loss of over 1.3 trillion USD in

developing countries in recent years. To tackle this issue, the OECD has created and instituted a system

for the exchange of information among countries for tax purposes, to which 132 countries have

become partners. This system will help combat tax evasion and seek to crack down on ‘tax havens’

around the globe.

The international rules that govern the taxation of corporations also contribute to the problem. Here

also, it is the most vulnerable who are most affected, as it is developing and least developed countries

that rely most on corporate taxation, especially of those in extractive industries.

Figure 3: Positive relationship between growth and educational quality

Source: Presentation delivered by Jeffrey Sachs, Columbia University

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For developing countries, remittances play a key role in the struggle against inequality. They provide

financial resources for many poor families in developing countries and also represent a net

redistribution from developing to developed countries; 400 billion dollars of remittances, a number

exceeding global ODA flows, provide a substantial source of financing to migrant workers’ families. This

heightens the importance of accelerating progress on the proposal contained in SDG10.10, to reduce

the transaction costs of migrant remittances to less than 3 per cent and eliminate remittance corridors

with costs higher than 5 per cent. However, costs of remittances are not the only challenge facing

migrant workers: Adverse working conditions and unequitable access to host county public services

need to be addressed to ensure that migrant workers do not face marginalization and exclusion.

Approximately 75% of people living in extreme poverty live in rural areas in developing countries, most

of them subsistence farmers and agricultural workers. Meanwhile, an estimated 800 million people

remain undernourished worldwide. These two numbers highlight the importance of addressing food

security and agriculture in the context of inequality. Unequal access to resources is the crucial factor, as

the world produces more than enough food to nourish all of humanity. The fact that one third of the

food produced globally is wasted, amplifies the ethical challenge of overcoming inequalities in access to

food.

In order to bridge the rural-urban gap and reduce inequalities based on geography, countries should

foster decentralisation and encourage investment, economic development and employment creation in

rural areas. The drivers of poverty and inequality in rural areas are based on a lack of access to a wide

range of resources, including land and water. Subsistence farmers often also do not have appropriate

financial resources to acquire food and agricultural products. The 2007-2010 spike in food prices was a

catalyst for greater inequality, hurting both consumers and farmers. The recent volatility in food prices

has also supported food insecurity, hitting the most vulnerable the hardest. The FAO has addressed this

Figure 4: Relation between Tax-GDP and Poverty

Source: Presentation delivered by Jeffrey Sachs, Columbia University

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issue through AMIS, the Agricultural Market Information System, built to enhance market transparency

and coordination.

At the global level, agricultural subsidies prevalent in developed countries are a key driver of

inequalities, as developing countries are effectively excluded from markets. The negative effects are

exasperated by the lack of a global institutional framework addressing inequalities in agriculture.

Putting in place such a framework could also enable the international community to act on global

challenges such as climate change and El Niño.

Despite the lack of a comprehensive global framework, there has been some progress at the global

level in addressing inequalities based on access to agricultural markets. The WTO Nairobi package was

an important step in improving market access and encouraging reductions in agricultural export

subsidies. The establishment of public national food stocks of agricultural products, built up from

national production and family farmers in particular, was also shown to be an important tool to support

domestic food supply and availability and thus tackle inequalities’ in access to food.

There is the need to find ways to empower people suffering from inequalities, giving them a voice and

appropriate tools to address inequalities. This can only be achieved through strengthened partnerships

that involve those left behind, not only individuals but also countries. No one country can overcome

the hurdles posed by inequalities alone. The objective of inequality reduction can only be achieved

through a dedicated and strong global institutional framework.

Despite this, there is currently no commission within the UN system to follow up, monitor, and

systematize approaches to inequality. Putting in place such a structure in the ECOSOC

intergovernmental system could represent an important step forward in institutionalising and creating

momentum to achieve the global commitment to combat inequalities.

There is the need to raise awareness among all groups that have a stake in SDG10 that inequalities can

only be reduced through comprehensive action in all its dimensions. This is a challenge that involves

leadership and engagement on the part of all stakeholders. Market forces, in and of themselves, will

not reduce inequalities. Rather, there’s a role to play for states, the private sector, and individuals.

Only through concerted action and by making the voices of all heard, can inequality be combatted at

the national, regional and global levels.